Notwithstanding the added burdens rendered necessary by the war, our
people rejoice in a very satisfactory and steadily increasing degree of
prosperity, evidenced by the largest volume of business ever recorded.
Manufacture has been productive, agricultural pursuits have yielded abundant
returns, labor in all fields of industry is better rewarded, revenue legislation
passed by the present Congress has increased the Treasury's receipts to
the amount estimated by its authors, the finances of the Government have
been successfully administered and its credit advanced to the first rank,
while its currency has been maintained at the world's highest standard.
Military service under a common flag and for a righteous cause has strengthened
the national spirit and served to cement more closely than ever the fraternal
bonds between every section of the country.

A review of the relation of the United States to other powers, always
appropriate, is this year of primary importance in view of the momentous
issues which have arisen, demanding in one instance the ultimate determination
by arms and involving far-reaching consequences which will require the
earnest attention of the Congress.

In my last annual message very full consideration was given to the question
of the duty of the Government of the United States toward Spain and the
Cuban insurrection as being by far the most important problem with which
we were then called upon to deal. The considerations then advanced and
the exposition of the views therein expressed disclosed my sense of the
extreme gravity of the situation. Setting aside as logically unfounded
or practically inadmissible the recognition of the Cuban insurgents as
belligerents, the recognition of the independence of Cuba, neutral intervention
to end the war by imposing a rational compromise between the contestants,
intervention in favor of one or the other party, and forcible annexation
of the island, I concluded it was honestly due to our friendly relations
with Spain that she should be given a reasonable chance to realize her
expectations of reform to which she had become irrevocably committed. Within
a few weeks previously she had announced comprehensive plans which it was
confidently asserted would be efficacious to remedy the evils so deeply
affecting our own country, so injurious to the true interests of the mother
country as well as to those of Cuba, and so repugnant to the universal
sentiment of humanity.

The ensuing month brought little sign of real progress toward the pacification
of Cuba. The autonomous administrations set up in the capital and some
of the principal cities appeared not to gain the favor of the inhabitants
nor to be able to extend their influence to the large extent of territory
held by the insurgents, while the military arm, obviously unable to cope
with the still active rebellion, continued many of the most objectionable
and offensive policies of the government that had preceded it. No tangible
relief was afforded the vast numbers of unhappy reconcentrados, despite
the reiterated professions made in that regard and the amount appropriated
by Spain to that end. The proffered expedient of zones of cultivation proved
illusory. Indeed no less practical nor more delusive promises of succor
could well have been tendered to the exhausted and destitute people, stripped
of all that made life and home dear and herded in a strange region among
unsympathetic strangers hardly less necessitous than themselves.

By the end of December the mortality among them had frightfully increased.
Conservative estimates from Spanish sources placed the deaths among these
distressed people at over 40 per cent from the time General Weyler's decree
of reconcentration was enforced. With the acquiescence of the Spanish authorities,
a scheme was adopted for relief by charitable contributions raised in this
country and distributed, under the direction of the consul-general and
the several consuls, by noble and earnest individual effort through the
organized agencies of the American Red Cross. Thousands of lives were thus
saved, but many thousands more were inaccessible to such forms of aid.

The war continued on the old footing, without comprehensive plan, developing
only the same spasmodic encounters, barren of strategic result, that had
marked the course of the earlier ten years' rebellion as well as the present
insurrection from its start. No alternative save physical exhaustion of
either combatant, and therewithal the practical ruin of the island, lay
in sight, but how far distant no one could venture to conjecture.

At this juncture, on the 15th of February last, occurred the destruction
of the battle ship Maine while rightfully lying in the harbor of Havana
on a mission of international courtesy and good will--a catastrophe the
suspicious nature and horror of which stirred the nation's heart profoundly.
It is a striking evidence of the poise and sturdy good sense distinguishing
our national character that this shocking blow, falling upon a generous
people already deeply touched by preceding events in Cuba, did not move
them to an instant desperate resolve to tolerate no longer the existence
of a condition of danger and disorder at our doors that made possible such
a deed, by whomsoever wrought. Yet the instinct of justice prevailed, and
the nation anxiously awaited the result of the searching investigation
at once set on foot. The finding of the naval board of inquiry established
that the origin of the explosion was external, by a submarine mine, and
only halted through lack of positive testimony to fix the responsibility
of its authorship.

All these things carried conviction to the most thoughtful, even before
the finding of the naval court, that a crisis in our relations with Spain
and toward Cuba was at hand. So strong was this belief that it needed but
a brief Executive suggestion to the Congress to receive immediate answer
to the duty of making instant provision for the possible and perhaps speedily
probable emergency of war, and the remarkable, almost unique, spectacle
was presented of a unanimous vote of both Houses, on the 9th of March,
appropriating $50,000,000 "for the national defense and for each and every
purpose connected therewith, to be expended at the discretion of the President."
That this act of prevision came none too soon was disclosed when the application
of the fund was undertaken. Our coasts were practically undefended. Our
Navy needed large provision for increased ammunition and supplies, and
even numbers to cope with any sudden attack from the navy of Spain, which
comprised modern vessels of the highest type of continental perfection.
Our Army also required enlargement of men and munitions. The details of
the hurried preparation for the dreaded contingency are told in the reports
of the Secretaries of War and of the Navy, and need not be repeated here.
It is sufficient to say that the outbreak of war when it did come found
our nation not unprepared to meet the conflict.

Nor was the apprehension of coming strife confined to our own country.
It was felt by the continental powers, which on April 6, through their
ambassadors and envoys, addressed to the Executive an expression of hope
that humanity and moderation might mark the course of this Government and
people, and that further negotiations would lead to an agreement which,
while securing the maintenance of peace, would afford all necessary guaranties
for the reestablishment of order in Cuba. In responding to that representation
I said I shared the hope the envoys had expressed that peace might be preserved
in a manner to terminate the chronic condition of disturbance in Cuba,
so injurious and menacing to our interests and tranquillity, as well as
shocking to our sentiments of humanity; and while appreciating the humanitarian
and disinterested character of the communication they had made on behalf
of the powers, I stated the confidence of this Government, for its part,
that equal appreciation would be shown for its own earnest and unselfish
endeavors to fulfill a duty to humanity by ending a situation the indefinite
prolongation of which had become insufferable.

Still animated by the hope of a peaceful solution and obeying the dictates
of duty, no effort was relaxed to bring about a speedy ending of the Cuban
struggle. Negotiations to this object continued actively with the Government
of Spain, looking to the immediate conclusion of a six months' armistice
in Cuba, with a view to effect the recognition of her people's right to
independence. Besides this, the instant revocation of the order of reconcentration
was asked, so that the sufferers, returning to their homes and aided by
united American and Spanish effort, might be put in a way to support themselves
and, by orderly resumption of the well-nigh destroyed productive energies
of the island, contribute to the restoration of its tranquillity and well-being.
Negotiations continued for some little time at Madrid, resulting in offers
by the Spanish Government which could not but be regarded as inadequate.
It was proposed to confide the preparation of peace to the insular parliament,
yet to be convened under the autonomous decrees of November, 1897, but
without impairment in any wise of the constitutional powers of the Madrid
Government, which to that end would grant an armistice, if solicited by
the insurgents, for such time as the general in chief might see fit to
fix. How and with what scope of discretionary powers the insular parliament
was expected to set about the "preparation" of peace did not appear. If
it were to be by negotiation with the insurgents, the issue seemed to rest
on the one side with a body chosen by a fraction of the electors in the
districts under Spanish control, and on the other with the insurgent population
holding the interior country, unrepresented in the so-called parliament
and defiant at the suggestion of suing for peace.

Grieved and disappointed at this barren outcome of my sincere endeavors
to reach a practicable solution, I felt it my duty to remit the whole question
to the Congress. In the message of April 11, 1898, I announced that with
this last overture in the direction of immediate peace in Cuba and its
disappointing reception by Spain the effort of the Executive was brought
to an end. I again reviewed the alternative courses of action which had
been proposed, concluding that the only one consonant with international
policy and compatible with our firm-set historical traditions was intervention
as a neutral to stop the war and check the hopeless sacrifice of life,
even though that resort involved "hostile constraint upon both the parties
to the contest, as well to enforce a truce as to guide the eventual settlement."
The grounds justifying that step were the interests of humanity, the duty
to protect the life and property of our citizens in Cuba, the right to
check injury to our commerce and people through the devastation of the
island, and, most important, the need of removing at once and forever the
constant menace and the burdens entailed upon our Government by the uncertainties
and perils of the situation caused by the unendurable disturbance in Cuba.
I said:

The long trial has proved that the object for which Spain has waged
the war can not be attained. The fire of insurrection may flame or may
smolder with varying seasons, but it has not been and it is plain that
it can not be extinguished by present methods. The only hope of relief
and repose from a condition which can no longer be endured is the enforced
pacification of Cuba. In the name of humanity, in the name of civilization,
in behalf of endangered American interests which give us the right and
the duty to speak and to act, the war in Cuba must stop.
In view of all this the Congress was asked to authorize and empower
the President to take measures to secure a full and final termination of
hostilities between Spain and the people of Cuba and to secure in the island
the establishment of a stable government, capable of maintaining order
and observing its international obligations, insuring peace and tranquillity
and the security of its citizens as well as our own, and for the accomplishment
of those ends to use the military and naval forces of the United States
as might be necessary, with added authority to continue generous relief
to the starving people of Cuba.

The response of the Congress, after nine days of earnest deliberation,
during which the almost unanimous sentiment of your body was developed
on every point save as to the expediency of coupling the proposed action
with a formal recognition of the Republic of Cuba as the true and lawful
government of that island--a proposition which failed of adoption--the
Congress, after conference, on the 19th of April, by a vote of 42 to 35
in the Senate and 311 to 6 in the House of Representatives, passed the
memorable joint resolution declaring--

First. That the people of the island of Cuba are, and of right ought
to be, free and independent.
Second. That it is the duty of the United States to demand, and the
Government of the United States does hereby demand, that the Government
of Spain at once relinquish its authority and government in the island
of Cuba and withdraw its land and naval forces from Cuba and Cuban waters.

Third. That the President of the United States be, and he hereby is,
directed and empowered to use the entire land and naval forces of the United
States and to call into the actual service of the United States the militia
of the several States to such extent as may be necessary to carry these
resolutions into effect.

Fourth. That the United States hereby disclaims any disposition or intention
to exercise sovereignty, jurisdiction, or control over said island except
for the pacification thereof, and asserts its determination when that is
accomplished to leave the government and control of the island to its people.

This resolution was approved by the Executive on the next day, April
20. A copy was at once communicated to the Spanish minister at this capital,
who forthwith announced that his continuance in Washington had thereby
become impossible, and asked for his passports, which were given him. He
thereupon withdrew from Washington, leaving the protection of Spanish interests
in the United States to the French ambassador and the Austro-Hungarian
minister. Simultaneously with its communication to the Spanish minister
here, General Woodford, the American minister at Madrid, was telegraphed
confirmation of the text of the joint resolution and directed to communicate
it to the Government of Spain with the formal demand that it at once relinquish
its authority and government in the island of Cuba and withdraw its forces
therefrom, coupling this demand with announcement of the intentions of
this Government as to the future of the island, in conformity with the
fourth clause of the resolution, and giving Spain until noon of April 23
to reply.

That demand, although, as above shown, officially made known to the
Spanish envoy here, was not delivered at Madrid. After the instruction
reached General Woodford on the morning of April 21, but before he could
present it, the Spanish minister of state notified him that upon the President's
approval of the joint resolution the Madrid Government, regarding the act
as "equivalent to an evident declaration of war," had ordered its minister
in Washington to withdraw, thereby breaking off diplomatic relations between
the two countries and ceasing all official communication between their
respective representatives. General Woodford thereupon demanded his passports
and quitted Madrid the same day.

Spain having thus denied the demand of the United States and initiated
that complete form of rupture of relations which attends a state of war,
the executive powers authorized by the resolution were at once used by
me to meet the enlarged contingency of actual war between sovereign states.
On April 22 I proclaimed a blockade of the north coast of Cuba, including
ports on said coast between Cardenas and Bahia Honda, and the port of Cienfuegos,
on the south coast of Cuba, and on the 23d I called for volunteers to execute
the purpose of the resolution. By my message of April 25 the Congress was
informed of the situation, and I recommended formal declaration of the
existence of a state of war between the United States and Spain. The Congress
accordingly voted on the same day the act approved April 25, 1898, declaring
the existence of such war from and including the 21st day of April, and
reenacted the provision of the resolution of April 20 directing the President
to use all the armed forces of the nation to carry that act into effect.||
Due notification of the existence of war as aforesaid was given April 25
by telegraph to all the governments with which the United States maintain
relations, in order that their neutrality might be assured during the war.
The various governments responded with proclamations of neutrality, each
after its own methods. It is not among the least gratifying incidents of
the struggle that the obligations of neutrality were impartially discharged
by all, often under delicate and difficult circumstances.

In further fulfillment of international duty I issued, April 26, 1893,
a proclamation announcing the treatment proposed to be accorded to vessels
and their cargoes as to blockade, contraband, the exercise of the right
of search, and the immunity of neutral flags and neutral goods under enemy's
flag. A similar proclamation was made by the Spanish Government. In the
conduct of hostilities the rules of the Declaration of Paris, including
abstention from resort to privateering, have accordingly been observed
by both belligerents, although neither was a party to that declaration.

Our country thus, after an interval of half a century of peace with
all nations, found itself engaged in deadly conflict with a foreign enemy.
Every nerve was strained to meet the emergency. The response to the initial
call for 125,000 volunteers was instant and complete, as was also the result
of the second call, of May 25, for 75,000 additional volunteers. The ranks
of the Regular Army were increased to the limits provided by the act of
April 26, 1898.

The enlisted force of the Navy on the 15th day of August, when it reached
its maximum, numbered 24,123 men and apprentices. One hundred and three
vessels were added to the Navy by purchase, 1 was presented to the Government,
1 leased, and the 4 vessels of the International Navigation Company--the
St. Paul, St. Louis, New York, and Paris--were chartered. In addition to
these the revenue cutters and lighthouse tenders were turned over to the
Navy Department and became temporarily a part of the auxiliary Navy.

The maximum effective fighting force of the Navy during the war, separated
into classes, was as follows:

Much alarm was felt along our entire Atlantic seaboard lest some attack
might be made by the enemy. Every precaution was taken to prevent possible
injury to our great cities lying along the coast. Temporary garrisons were
provided, drawn from the State militia; infantry and light batteries were
drawn from the volunteer force. About 12,000 troops were thus employed.
The coast signal service was established for observing the approach of
an enemy's ships to the coast of the United States, and the Life-Saving
and Light-House services cooperated, which enabled the Navy Department
to have all portions of the Atlantic coast, from Maine to Texas, under
observation.

The auxiliary Navy was created under the authority of Congress and was
officered and manned by the Naval Militia of the several States. This organization
patrolled the coast and performed the duty of a second line of defense.
Under the direction of the Chief of Engineers submarine mines were placed
at the most exposed points. Before the outbreak of the war permanent mining
casemates and cable galleries had been constructed at nearly all important
harbors. Most of the torpedo material was not to be found in the market,
and had to be specially manufactured. Under date of April 19 district officers
were directed to take all preliminary measures short of the actual attaching
of the loaded mines to the cables, and on April 22 telegraphic orders were
issued to place the loaded mines in position.

The aggregate number of mines placed was 1,535, at the principal harbors
from Maine to California. Preparations were also made for the planting
of mines at certain other harbors, but owing to the early destruction of
the Spanish fleet these mines were not placed.

The Signal Corps was promptly organized, and performed service of the
most difficult and important character. Its operations during the war covered
the electrical connection of all coast fortifications, the establishment
of telephonic and telegraphic facilities for the camps at Manila, Santiago,
and in Puerto Rico. There were constructed 300 miles of line at ten great
camps, thus facilitating military movements from those points in a manner
heretofore unknown in military administration. Field telegraph lines were
established and maintained under the enemy's fire at Manila, and later
the Manila-Hongkong cable was reopened.

In Puerto Rico cable communications were opened over a discontinued
route, and on land the headquarters of the commanding officer was kept
in telegraphic or telephonic communication with the division commanders
on four different lines of operations.

There was placed in Cuban waters a completely outfitted cable ship,
with war cables and cable gear, suitable both for the destruction of communications
belonging to the enemy and the establishment of our own. Two ocean cables
were destroyed under the enemy's batteries at Santiago. The day previous
to the landing of General Shafter's corps, at Caimanera, within 20 miles
of the landing place, cable communications were established and a cable
station opened giving direct communication with the Government at Washington.
This service was invaluable to the Executive in directing the operations
of the Army and Navy. With a total force of over 1,300, the loss was by
disease in camp and field, officers and men included, only 5.

The national-defense fund of $50,000,000 was expended in large part
by the Army and Navy, and the objects for which it was used are fully shown
in the reports of the several Secretaries. It was a most timely appropriation,
enabling the Government to strengthen its defenses and make preparations
greatly needed in case of war.

This fund being inadequate to the requirements of equipment and for
the conduct of the war, the patriotism of the Congress provided the means
in the war-revenue act of June 13 by authorizing a 3 per cent popular loan
not to exceed $400,000,000 and by levying additional imposts and taxes.
Of the authorized loan $200,000,000 were offered and promptly taken the
subscriptions so far exceeding the call as to cover it many times over,
while, preference being given to the smaller bids, no single allotment
exceeded $5,000. This was a most encouraging and significant result, showing
the vast resources of the nation and the determination of the people to
uphold their country's honor.

It is not within the province of this message to narrate the history
of the extraordinary war that followed the Spanish declaration of April
21, but a brief recital of its more salient features is appropriate.

The first encounter of the war in point of date took place April 27,
when a detachment of the blockading squadron made a reconnoissance in force
at Matanzas, shelled the harbor forts, and demolished several new works
in construction.

The next engagement was destined to mark a memorable epoch in maritime
warfare. The Pacific fleet, under Commodore George Dewey, had lain for
some weeks at Hongkong. Upon the colonial proclamation of neutrality being
issued and the customary twenty-four hours' notice being given, it repaired
to Mirs Bay, near Hongkong, whence it proceeded to the Philippine Islands
under telegraphed orders to capture or destroy the formidable Spanish fleet
then assembled at Manila. At daybreak on the 1st of May the American force
entered Manila Bay, and after a few hours' engagement effected the total
destruction of the Spanish fleet, consisting of ten war ships and a transport,
besides capturing the naval station and forts at Cavite, thus annihilating
the Spanish naval power in the Pacific Ocean and completely controlling
the bay of Manila, with the ability to take the city at will. Not a life
was lost on our ships, the wounded only numbering seven, while not a vessel
was materially injured. For this gallant achievement the Congress, upon
my recommendation, fitly bestowed upon the actors preferment and substantial
reward.

The effect of this remarkable victory upon the spirit of our people
and upon the fortunes of the war was instant. A prestige of invincibility
thereby attached to our arms which continued throughout the struggle. Reenforcements
were hurried to Manila under the command of Major-General Merritt and firmly
established within sight of the capital, which lay helpless before our
guns.

On the 7th day of May the Government was advised officially of the victory
at Manila, and at once inquired of the commander of our fleet what troops
would be required. The information was received on the 15th day of May,
and the first army expedition sailed May 25 and arrived off Manila June
30. Other expeditions soon followed, the total force consisting of 641
officers and 15,058 enlisted men.

Only reluctance to cause needless loss of life and property prevented
the early storming and capture of the city, and therewith the absolute
military occupancy of the whole group. The insurgents meanwhile had resumed
the active hostilities suspended by the uncompleted truce of December,
1897. Their forces invested Manila from the northern and eastern sides,
but were constrained by Admiral Dewey and General Merrill from attempting
an assault. It was fitting that whatever was to be done in the way of decisive
operations in that quarter should be accomplished by the strong arm of
the United States alone. Obeying the stern precept of war which enjoins
the overcoming of the adversary and the extinction of his power wherever
assailable as the speedy and sure means to win a peace, divided victory
was not permissible, for no partition of the rights and responsibilities
attending the enforcement of a just and advantageous peace could be thought
of.

Following the comprehensive scheme of general attack, powerful forces
were assembled at various points on our coast to invade Cuba and Puerto
Rico. Meanwhile naval demonstrations were made at several exposed points.
On May 11 the cruiser Wilmington and torpedo boat Winslow were unsuccessful
in an attempt to silence the batteries at Cardenas, a gallant ensign, Worth
Bagley, and four seamen falling. These grievous fatalities were, strangely
enough, among the very few which occurred during our naval operations in
this extraordinary conflict.

Meanwhile the Spanish naval preparations had been pushed with great
vigor. A powerful squadron under Admiral Cervera, which had assembled at
the Cape Verde Islands before the outbreak of hostilities, had crossed
the ocean, and by its erratic movements in the Caribbean Sea delayed our
military plans while baffling the pursuit of our fleets. For a time fears
were felt lest the Oregon and Marietta, then nearing home after their long
voyage from San Francisco of over 15,000 miles, might be surprised by Admiral
Cervera's fleet, but their fortunate arrival dispelled these apprehensions
and lent much-needed reenforcement. Not until Admiral Cervera took refuge
in the harbor of Santiago de Cuba, about May 19, was it practicable to
plan a systematic naval and military attack upon the Antillean possessions
of Spain.

Several demonstrations occurred on the coasts of Cuba and Puerto Rico
in preparation for the larger event. On May 13 the North Atlantic Squadron
shelled San Juan de Puerto Rico. On May 30 Commodore Schley's squadron
bombarded the forts guarding the mouth of Santiago Harbor. Neither attack
had any material result. It was evident that well-ordered land operations
were indispensable to achieve a decisive advantage.

The next act in the war thrilled not alone the hearts of our countrymen
but the world by its exceptional heroism. On the night of June 3 Lieutenant
Hobson, aided by seven devoted volunteers, blocked the narrow outlet from
Santiago Harbor by sinking the collier Merrimac in the channel, under a
fierce fire from the shore batteries, escaping with their lives as by a
miracle, but falling into the hands of the Spaniards. It is a most gratifying
incident of the war that the bravery of this little band of heroes was
cordially appreciated by the Spanish admiral, who sent a flag of truce
to notify Admiral Sampson of their safety and to compliment them on their
daring act. They were subsequently exchanged July 7.

By June 7 the cutting of the last Cuban cable isolated the island. Thereafter
the invasion was vigorously prosecuted. On June 10, under a heavy protecting
fire, a landing of 600 marines from the Oregon, Marblehead, and Yankee
was effected in Guantanamo Bay, where it had been determined to establish
a naval station.

This important and essential port was taken from the enemy, after severe
fighting, by the marines, who were the first organized force of the United
States to land in Cuba.

The position so won was held despite desperate attempts to dislodge
our forces. By June 16 additional forces were landed and strongly in-trenched.
On June 22 the advance of the invading army under Major-General Shafter
landed at Daiquiri, about 15 miles east of Santiago. This was accomplished
under great difficulties, but with marvelous dispatch. On June 23 the movement
against Santiago was begun. On the 24th the first serious engagement took
place, in which the First and Tenth Cavalry and the First United States
Volunteer Cavalry, General Young's brigade of General Wheeler's division,
participated, losing heavily. By nightfall, however, ground within 5 miles
of Santiago was won. The advantage was steadily increased. On July 1 a
severe battle took place, our forces gaining the outworks of Santiago;
on the 2d El Caney and San Juan were taken after a desperate charge, and
the investment of the city was completed. The Navy cooperated by shelling
the town and the coast forts.

On the day following this brilliant achievement of our land forces,
the 3d of July, occurred the decisive naval combat of the war. The Spanish
fleet, attempting to leave the harbor, was met by the American squadron
under command of Commodore Sampson. In less than three hours all the Spanish
ships were destroyed, the two torpedo boats being sunk and the Maria Teresa,
Almirante Oquendo, Vizcaya, and Cristobal Colon driven ashore. The Spanish
admiral and over 1,300 men were taken prisoners. While the enemy's loss
of life was deplorably large, some 600 perishing, on our side but one man
was killed, on the Brooklyn, and one man seriously wounded. Although our
ships were repeatedly struck, not one was seriously injured. Where all
so conspicuously distinguished themselves, from the commanders to the gunners
and the unnamed heroes in the boiler rooms, each and all contributing toward
the achievement of this astounding victory, for which neither ancient nor
modern history affords a parallel in the completeness of the event and
the marvelous disproportion of casualties, it would be invidious to single
out any for especial honor. Deserved promotion has rewarded the more conspicuous
actors. The nation's profoundest gratitude is due to all of these brave
men who by their skill and devotion in a few short hours crushed the sea
power of Spain and wrought a triumph whose decisiveness and far-reaching
consequences can scarcely be measured. Nor can we be unmindful of the achievements
of our builders, mechanics, and artisans for their skill in the construction
of our war ships.

With the catastrophe of Santiago Spain's effort upon the ocean virtually
ceased. A spasmodic effort toward the end of June to send her Mediterranean
fleet, under Admiral Camara, to relieve Manila was abandoned, the expedition
being recalled after it had passed through the Suez Canal.

The capitulation of Santiago followed. The city was closely besieged
by land, while the entrance of our ships into the harbor cut off all relief
on that side. After a truce to allow of the removal of noncombatants protracted
negotiations continued from July 3 until July 15, when, under menace of
immediate assault, the preliminaries of surrender were agreed upon. On
the 17th General Shafter occupied the city. The capitulation embraced the
entire eastern end of Cuba. The number of Spanish soldiers surrendering
was 22,000, all of whom were subsequently conveyed to Spain at the charge
of the United States. The story of this successful campaign is told in
the report of the Secretary of War, which will be laid before you. The
individual valor of officers and soldiers was never more strikingly shown
than in the several engagements leading to the surrender of Santiago, while
the prompt movements and successive victories won instant and universal
applause. To those who gained this complete triumph, which established
the ascendency of the United States upon land as the fight off Santiago
had fixed our supremacy on the seas, the earnest and lasting gratitude
of the nation is unsparingly due. Nor should we alone remember the gallantry
of the living; the dead claim our tears, and our losses by battle and disease
must cloud any exultation at the result and teach us to weigh the awful
cost of war, however rightful the cause or signal the victory.

With the fall of Santiago the occupation of Puerto Rico became the next
strategic necessity. General Miles had previously been assigned to organize
an expedition for that purpose. Fortunately he was already at Santiago,
where he had arrived on the 11th of July with reenforcements for General
Shafter's army.

With these troops, consisting of 3,415 infantry and artillery, two companies
of engineers, and one company of the Signal Corps, General Miles left Guantanamo
on July 21, having nine transports convoyed by the fleet under Captain
Higginson with the Massachusetts (flagship), Dixie, Gloucester, Columbia,
and Yale, the two latter carrying troops. The expedition landed at Guanica
July 25, which port was entered with little opposition. Here the fleet
was joined by the Annapolis and the Wasp, while the Puritan and Amphitrite
went to San Juan and joined the New Orleans, which was engaged in blockading
that port. The Major-General Commanding was subsequently reenforced by
General Schwan's brigade of the Third Army Corps, by General Wilson with
a part of his division, and also by General Brooke with a part of his corps,
numbering in all 16,973 officers and men.

On July 27 he entered Ponce, one of the most important ports in the
island, from which he thereafter directed operations for the capture of
the island.

With the exception of encounters with the enemy at Guayama, Hormigueros,
Coamo, and Yauco and an attack on a force landed at Cape San Juan, there
was no serious resistance. The campaign was prosecuted with great vigor,
and by the 12th of August much of the island was in our possession and
the acquisition of the remainder was only a matter of a short time. At
most of the points in the island our troops were enthusiastically welcomed.
Protestations of loyalty to the flag and gratitude for delivery from Spanish
rule met our commanders at every stage. As a potent influence toward peace
the outcome of the Puerto Rican expedition was of great consequence, and
generous commendation is due to those who participated in it.

The last scene of the war was enacted at Manila, its starting place.
On August 15, after a brief assault upon the works by the land forces,
in which the squadron assisted, the capital surrendered unconditionally.
The casualties were comparatively few. By this the conquest of the Philippine
Islands, virtually accomplished when the Spanish capacity for resistance
was destroyed by Admiral Dewey's victory of the 1st of May, was formally
sealed. To General Merrill, his officers and men, for their uncomplaining
and devoted service and for their gallantry in action, the nation is sincerely
grateful. Their long voyage was made with singular success, and the soldierly
conduct of the men, most of whom were without previous experience in the
military service, deserves unmeasured praise.

The total casualties in killed and wounded in the Army during the war
with Spain were: Officers killed, 23; enlisted men killed, 257; total,
280; officers wounded, 113; enlisted men wounded, 1,464; total, 1,577.
Of the Navy: Killed, 17; wounded, 67; died as result of wounds, 1; invalided
from service, 6; total, 91.

It will be observed that while our Navy was engaged in two great battles
and in numerous perilous undertakings in blockade and bombardment, and
more than 50,000 of our troops were transported to distant lands and were
engaged in assault and siege and battle and many skirmishes in unfamiliar
territory, we lost in both arms of the service a total of 1,668 killed
and wounded; and in the entire campaign by land and sea we did not lose
a gun or a flag or a transport or a ship, and, with the exception of the
crew of the Merrimac, not a soldier or sailor was taken prisoner.

On August 7, forty-six days from the date of the landing of General
Shafter's army in Cuba and twenty-one days from the surrender of Santiago,
the United States troops commenced embarkation for home, and our entire
force was returned to the United States as early as August 24. They were
absent from the United States only two months.

It is fitting that I should bear testimony to the patriotism and devotion
of that large portion of our Army which, although eager to be ordered to
the post of greatest exposure, fortunately was not required outside of
the United States. They did their whole duty, and, like their comrades
at the front, have earned the gratitude of the nation. In like manner,
the officers and men of the Army and of the Navy who remained in their
departments and stations faithfully performing most important duties connected
with the war, and whose requests for assignment in the field and at sea
I was compelled to refuse because their services were indispensable here,
are entitled to the highest commendation. It is my regret that there seems
to be no provision for their suitable recognition.

In this connection it is a pleasure for me to mention in terms of cordial
appreciation the timely and useful work of the American National Red Cross,
both in relief measures preparatory to the campaigns, in sanitary assistance
at several of the camps of assemblage, and later, under the able and experienced
leadership of the president of the society, Miss Clara Barton, on the fields
of battle and in the hospitals at the front in Cuba. Working in conjunction
with the governmental authorities and under their sanction and approval,
and with the enthusiastic cooperation of many patriotic women and societies
in the various States, the Red Cross has fully maintained its already high
reputation for intense earnestness and ability to exercise the noble purposes
of its international organization, thus justifying the confidence and support
which it has received at the hands of the American people. To the members
and officers of this society and all who aided them in their philanthropic
work the sincere and lasting gratitude of the soldiers and the public is
due and is freely accorded.

In tracing these events we are constantly reminded of our obligations
to the Divine Master for His watchful care over us and His safe guidance,
for which the nation makes reverent acknowledgment and offers humble prayer
for the continuance of His favor.

The annihilation of Admiral Cervera's fleet, followed by the capitulation
of Santiago, having brought to the Spanish Government a realizing sense
of the hopelessness of continuing a struggle now become wholly unequal,
it made overtures of peace through the French ambassador, who, with the
assent of his Government, had acted as the friendly representative of Spanish
interests during the war. On the 26th of July M. Cambon presented a communication
signed by the Duke of Almodovar, the Spanish minister of state, inviting
the United States to state the terms upon which it would be willing to
make peace. On the 30th of July, by a communication addressed to the Duke
of Almodovar and handed to M. Cambon, the terms of this Government were
announced substantially as in the protocol afterwards signed. On the 10th
of August the Spanish reply, dated August 7, was handed by M. Cambon to
the Secretary of State. It accepted unconditionally the terms imposed as
to Cuba, Puerto Rico, and an island of the Ladrones group, but appeared
to seek to introduce inadmissible reservations in regard to our demand
as to the Philippine Islands. Conceiving that discussion on this point
could neither be practical nor profitable, I directed that in order to
avoid misunderstanding the matter should be forthwith closed by proposing
the embodiment in a formal protocol of the terms upon which the negotiations
for peace were to be undertaken. The vague and inexplicit suggestions of
the Spanish note could not be accepted, the only reply being to present
as a virtual ultimatum a draft of protocol embodying the precise terms
tendered to Spain in our note of July 30, with added stipulations of detail
as to the appointment of commissioners to arrange for the evacuation of
the Spanish Antilles. On August 12 M. Cambon announced his receipt of full
powers to sign the protocol so submitted. Accordingly, on the afternoon
of August 12, M. Cambon, as the plenipotentiary of Spain, and the Secretary
of State, as the plenipotentiary of the United States, signed a protocol
providing--

ARTICLE I. Spain will relinquish all claim of sovereignty over and title
to Cuba.
ART. II. Spain will cede to the United States the island of Puerto
Rico and other islands now under Spanish sovereignty in the West Indies,
and also an island in the Ladrones to be selected by the United States.

ART. III. The United States will occupy and hold the city, bay, and
harbor of Manila pending the conclusion of a treaty of peace which shall
determine the control, disposition, and government of the Philippines.

The fourth article provided for the appointment of joint commissions
on the part of the United States and Spain, to meet in Havana and San Juan,
respectively, for the purpose of arranging and carrying out the details
of the stipulated evacuation of Cuba, Puerto Rico, and other Spanish islands
in the West Indies.
The fifth article provided for the appointment of not more than five
commissioners on each side, to meet at Paris not later than October 1 and
to proceed to the negotiation and conclusion of a treaty of peace, subject
to ratification according to the respective constitutional forms of the
two countries.

The sixth and last article provided that upon the signature of the protocol
hostilities between the two countries should be suspended and that notice
to that effect should be given as soon as possible by each Government to
the commanders of its military and naval forces.

Immediately upon the conclusion of the protocol I issued a proclamation,
of August 12 , suspending hostilities on the part of the United States.
The necessary orders to that end were at once given by telegraph. The blockade
of the ports of Cuba and San Juan de Puerto Rico was in like manner raised.
On the 18th of August the muster out of 100,000 volunteers, or as near
that number as was found to be practicable, was ordered.

On the 1st of December 101,165 officers and men had been mustered out
and discharged from the service, and 9,002 more will be mustered out by
the 10th of this month; also a corresponding number of general and general
staff officers have been honorably discharged the service.

The military commissions to superintend the evacuation of Cuba, Puerto
Rico, and the adjacent islands were forthwith appointed--for Cuba, Major-General
James F. Wade, Rear-Admiral William T. Sampson, Major-General Matthew C.
Butler; for Puerto Rico, Major--General John R. Brooke, Rear-Admiral Winfield
S. Schley, Brigadier-General William W. Gordon--who soon afterwards met
the Spanish commissioners at Havana and San Juan, respectively. The Puerto
Rican Joint Commission speedily accomplished its task, and by the 18th
of October the evacuation of the island was completed. The United States
flag was raised over the island at noon on that day. The administration
of its affairs has been provisionally intrusted to a military governor
until the Congress shall otherwise provide. The Cuban Joint Commission
has not yet terminated its labors. Owing to the difficulties in the way
of removing the large numbers of Spanish troops still in Cuba, the evacuation
can not be completed before the 1st of January next.

Pursuant to the fifth article of the protocol, I appointed William R.
Day, lately Secretary of State; Cushman K. Davis, William P. Frye, and
George Gray, Senators of the United States, and Whitelaw Reid to be the
peace commissioners on the part of the United States. Proceeding in due
season to Paris, they there met on the 1st of October five commissioners
similarly appointed on the part of Spain. Their negotiations have made
hopeful progress, so that I trust soon to be able to lay a definitive treaty
of peace before the Senate, with a review of the steps leading to its signature.

I do not discuss at this time the government or the future of the new
possessions which will come to us as the result of the war with Spain.
Such discussion will be appropriate after the treaty of peace shall be
ratified. In the meantime and until the Congress has legislated otherwise
it will be my duty to continue the military governments which have existed
since our occupation and give to the people security in life and property
and encouragement under a just and beneficent rule.

As soon as we are in possession of Cuba and have pacified the island
it will be necessary to give aid and direction to its people to form a
government for themselves. This should be undertaken at the earliest moment
consistent with safety and assured success. It is important that our relations
with this people shall be of the most friendly character and our commercial
relations close and reciprocal. It should be our duty to assist in every
proper way to build up the waste places of the island, encourage the industry
of the people, and assist them to form a government which shall be free
and independent, thus realizing the best aspirations of the Cuban people.

Spanish rule must be replaced by a just, benevolent, and humane government,
created by the people of Cuba, capable of performing all international
obligations, and which shall encourage thrift, industry, and prosperity
and promote peace and good will among all of the inhabitants, whatever
may have been their relations in the past. Neither revenge nor passion
should have a place in the new government. Until there is complete tranquillity
in the island and a stable government inaugurated military occupation will
be continued.

With the one exception of the rupture with Spain, the intercourse of
the United States with the great family of nations has been marked with
cordiality, and the close of the eventful year finds most of the issues
that necessarily arise in the complex relations of sovereign states adjusted
or presenting no serious obstacle to a just and honorable solution by amicable
agreement.

A long unsettled dispute as to the extended boundary between the Argentine
Republic and Chile, stretching along the Andean crests from the southern
border of the Atacama Desert to Magellan Straits, nearly a third of the
length of the South American continent, assumed an acute stage in the early
part of the year, and afforded to this Government occasion to express the
hope that the resort to arbitration, already contemplated by existing conventions
between the parties, might prevail despite the grave difficulties arising
in its application. I am happy to say that arrangements to this end have
been perfected, the questions of fact upon which the respective commissioners
were unable to agree being in course of reference to Her Britannic Majesty
for determination. A residual difference touching the northern boundary
line across the Atacama Desert, for which existing treaties provided no
adequate adjustment, bids fair to be settled in like manner by a joint
commission, upon which the United States minister at Buenos Ayres has been
invited to serve as umpire in the last resort.

I have found occasion to approach the Argentine Government with a view
to removing differences of rate charges imposed upon the cables of an American
corporation in the transmission between Buenos Ayres and the cities of
Uruguay and Brazil of through messages passing from and to the United States.
Although the matter is complicated by exclusive concessions by Uruguay
and Brazil to foreign companies, there is strong hope that a good understanding
will be reached and that the important channels of commercial communication
between the United States and the Atlantic cities of South America may
be freed from an almost prohibitory discrimination.

In this relation I may be permitted to express my sense of the fitness
of an international agreement whereby the interchange of messages over
connecting cables may be regulated on a fair basis of uniformity. The world
has seen the postal system developed from a congeries of independent and
exclusive services into a well-ordered union, of which all countries enjoy
the manifold benefits. It would be strange were the nations not in time
brought to realize that modern civilization, which owes so much of its
progress to the annihilation of space by the electric force, demands that
this all-important means of communication be a heritage of all peoples,
to be administered and regulated in their common behoof. A step in this
direction was taken when the international convention of 1884 for the protection
of submarine cables was signed, and the day is, I trust, not far distant
when this medium for the transmission of thought from land to land may
be brought within the domain of international concert as completely as
is the material carriage of commerce and correspondence upon the face of
the waters that divide them.

The claim of Thomas Jefferson Page against Argentina, which has been
pending many years, has been adjusted. The sum awarded by the Congress
of Argentina was $4,242.35.

The sympathy of the American people has justly been offered to the ruler
and the people of Austria-Hungary by reason of the affliction that has
lately befallen them in the assassination of the Empress-Queen of that
historic realm.

On the 10th of September, 1897, a conflict took place at Lattimer, Pa.,
between a body of striking miners and the sheriff of Luzerne County and
his deputies, in which 22 miners were killed and 44 wounded, of whom 10
of the killed and 12 of the wounded were Austrian and Hungarian subjects.
This deplorable event naturally aroused the solicitude of the Austro-Hungarian
Government, which, on the assumption that the killing and wounding involved
the unjustifiable misuse of authority, claimed reparation for the sufferers.
Apart from the searching investigation and peremptory action of the authorities
of Pennsylvania, the Federal Executive took appropriate steps to learn
the merits of the case, in order to be in a position to meet the urgent
complaint of a friendly power. The sheriff and his deputies, having been
indicted for murder, were tried, and acquitted, after protracted proceedings
and the hearing of hundreds of witnesses, on the ground that the killing
was in the line of their official duty to uphold law and preserve public
order in the State. A representative of the Department of Justice attended
the trial and reported its course fully. With all the facts in its possession,
this Government expects to reach a harmonious understanding on the subject
with that of Austria-Hungary, notwithstanding the renewed claim of the
latter, after learning the result of the trial, for indemnity for its injured
subjects.

Despite the brief time allotted for preparation, the exhibits of this
country at the Universal Exposition at Brussels in 1897 enjoyed the singular
distinction of a larger proportion of awards, having regard to the number
and classes of articles entered than those of other countries. The worth
of such a result in making known our national capacity to supply the world's
markets is obvious.

Exhibitions of this international character are becoming more frequent
as the exchanges of commercial countries grow more intimate and varied.
Hardly a year passes that this Government is not invited to national participation
at some important foreign center, but often on too short notice to permit
of recourse to Congress for the power and means to do so. My predecessors
have suggested the advisability of providing by a general enactment and
a standing appropriation for accepting such invitations and for representation
of this country by a commission. This plan has my cordial approval.

I trust that the Belgian restrictions on the importation of cattle from
the United States, originally adopted as a sanitary precaution, will at
an early day be relaxed as to their present features of hardship and discrimination,
so as to admit live cattle under due regulation of their slaughter after
landing. I am hopeful, too, of favorable change in the Belgian treatment
of our preserved and salted meats. The growth of direct trade between the
two countries, not alone for Belgian consumption and Belgian products,
but by way of transit from and to other continental states, has been both
encouraging and beneficial. No effort will be spared to enlarge its advantages
by seeking the removal of needless impediments and by arrangements for
increased commercial exchanges.

The year's events in Central America deserve more than passing mention.

A menacing rupture between Costa Rica and Nicaragua was happily composed
by the signature of a convention between the parties, with the concurrence
of the Guatemalan representative as a mediator, the act being negotiated
and signed on board the United States steamer Alert, then lying in Central
American waters. It is believed that the good offices of our envoy and
of the commander of that vessel contributed toward this gratifying outcome.

In my last annual message the situation was presented with respect to
the diplomatic representation of this Government in Central America created
by the association of Nicaragua, Honduras, and Salvador under the title
of the Greater Republic of Central America, and the delegation of their
international functions to the Diet thereof. While the representative character
of the Diet was recognized by my predecessor and has been confirmed during
my Administration by receiving its accredited envoy and granting exequaturs
to consuls commissioned under its authority, that recognition was qualified
by the distinct understanding that the responsibility of each of the component
sovereign Republics toward the United States remained wholly unaffected.

This proviso was needful inasmuch as the compact of the three Republics
was at the outset an association whereby certain representative functions
were delegated to a tripartite commission rather than a federation possessing
centralized powers of government and administration. In this view of their
relation and of the relation of the United States to the several Republics,
a change in the representation of this country in Central America was neither
recommended by the Executive nor initiated by Congress, thus leaving one
of our envoys accredited, as heretofore, separately to two States of the
Greater Republic, Nicaragua and Salvador, and to a third State, Costa Rica,
which was not a party to the compact, while our other envoy was similarly
accredited to a union State, Honduras, and a nonunion State, Guatemala.
The result has been that the one has presented credentials only to the
President of Costa Rica, the other having been received only by the Government
of Guatemala.

Subsequently the three associated Republics entered into negotiations
for taking the steps forecast in the original compact. A convention of
their delegates framed for them a federal constitution under the name of
the United States of Central America, and provided for a central federal
government and legislature. Upon ratification by the constituent States,
the 1st of November last was fixed for the new system to go into operation.
Within a few weeks thereafter the plan was severely tested by revolutionary
movements arising, with a consequent demand for unity of action on the
part of the military power of the federal States to suppress them. Under
this strain the new union seems to have been weakened through the withdrawal
of its more important members. This Government was not officially advised
of the installation of the federation and has maintained an attitude of
friendly expectancy, while in no wise relinquishing the position held from
the outset that the responsibilities of the several States toward us remained
unaltered by their tentative relations among themselves.

The Nicaragua Canal Commission, under the chairmanship of Rear-Admiral
John G. Walker, appointed July 24, 1897, under the authority of a provision
in the sundry civil act of June 4 of that year, has nearly completed its
labors, and the results of its exhaustive inquiry into the proper route,
the feasibility, and the cost of construction of an interoceanic canal
by a Nicaraguan route will be laid before you. In the performance of its
task the commission received all possible courtesy and assistance from
the Governments of Nicaragua and Costa Rica, which thus testified their
appreciation of the importance of giving a speedy and practical outcome
to the great project that has for so many years engrossed the attention
of the respective countries.

As the scope of the recent inquiry embraced the whole subject, with
the aim of making plans and surveys for a canal by the most convenient
route, it necessarily included a review of the results of previous surveys
and plans, and in particular those adopted by the Maritime Canal Company
under its existing concessions from Nicaragua and Costa Rica, so that to
this extent those grants necessarily hold as essential a part in the deliberations
and conclusions of the Canal Commission as they have held and must needs
hold in the discussion of the matter by the Congress. Under these circumstances
and in view of overtures made to the Governments of Nicaragua and Costa
Rica by other parties for a new canal concession predicated on the assumed
approaching lapse of the contracts of the Maritime Canal Company with those
States, I have not hesitated to express my conviction that considerations
of expediency and international policy as between the several governments
interested in the construction and control of an interoceanic canal by
this route require the maintenance of the status quo until the Canal Commission
shall have reported and the United States Congress shall have had the opportunity
to pass finally upon the whole matter during the present session, without
prejudice by reason of any change in the existing conditions.

Nevertheless, it appears that the Government of Nicaragua, as one of
its last sovereign acts before merging its powers in those of the newly
formed United States of Central America, has granted an optional concession
to another association, to become effective on the expiration of the present
grant. It does not appear what surveys have been made or what route is
proposed under this contingent grant, so that an examination of the feasibility
of its plans is necessarily not embraced in the report of the Canal Commission.
All these circumstances suggest the urgency of some definite action by
the Congress at this session if the labors of the past are to be utilized
and the linking of the Atlantic and Pacific oceans by a practical waterway
is to be realized. That the construction of such a maritime highway is
now more than ever indispensable to that intimate and ready intercommunication
between our eastern and western seaboards demanded by the annexation of
the Hawaiian Islands and the prospective expansion of our influence and
commerce in the Pacific, and that our national policy now more imperatively
than ever calls for its control by this Government, are propositions which
I doubt not the Congress will duly appreciate and wisely act upon.

A convention providing for the revival of the late United States and
Chilean Claims Commission and the consideration of claims which were duly
presented to the late commission, but not considered because of the expiration
of the time limited for the duration of the commission, was signed May
24, 1897, and has remained unacted upon by the Senate. The term therein
fixed for effecting the exchange of ratifications having elapsed, the convention
falls unless the time be extended by amendment, which I am endeavoring
to bring about, with the friendly concurrence of the Chilean Government.

The United States has not been an indifferent spectator of the extraordinary
events transpiring in the Chinese Empire, whereby portions of its maritime
provinces are passing under the control of various European powers; but
the prospect that the vast commerce which the energy of our citizens and
the necessity of our staple productions for Chinese uses has built up in
those regions may not be prejudiced through any exclusive treatment by
the new occupants has obviated the need of our country becoming an actor
in the scene. Our position among nations, having a large Pacific coast
and a constantly expanding direct trade with the farther Orient, gives
us the equitable claim to consideration and friendly treatment in this
regard, and it will be my aim to subserve our large interests in that quarter
by all means appropriate to the constant policy of our Government. The
territories of Kiao-chow, of Wei-hai-wei, and of Port Arthur and Talienwan,
leased to Germany, Great Britain, and Russia, respectively, for terms of
years, will, it is announced, be open to international commerce during
such alien occupation; and if no discriminating treatment of American citizens
and their trade be found to exist or be hereafter developed, the desire
of this Government would appear to be realized.

In this relation, as showing the volume and value of our exchanges with
China and the peculiarly favorable conditions which exist for their expansion
in the normal course of trade, I refer to the communication addressed to
the Speaker of the House of Representatives by the Secretary of the Treasury
on the 14th of last June, with its accompanying letter of the Secretary
of State, recommending an appropriation for a commission to study the commercial
and industrial conditions in the Chinese Empire and report as to the opportunities
for and obstacles to the enlargement of markets in China for the raw products
and manufactures of the United States. Action was not taken thereon during
the late session. I cordially urge that the recommendation receive at your
hands the consideration which its importance and timeliness merit.

Meanwhile there may be just ground for disquietude in view of the unrest
and revival of the old sentiment of opposition and prejudice to alien people
which pervades certain of the Chinese provinces. As in the case of the
attacks upon our citizens in Szechuen and at Kutien in 1895, the United
States minister has been instructed to secure the fullest measure of protection,
both local and imperial, for any menaced American interests, and to demand,
in case of lawless injury to person or property, instant reparation appropriate
to the case. War ships have been stationed at Tientsin for more ready observation
of the disorders which have invaded even the Chinese capital, so as to
be in a position to act should need arise, while a guard of marines has
been sent to Peking to afford the minister the same measure of authoritative
protection as the representatives of other nations have been constrained
to employ.

Following close upon the rendition of the award of my predecessor as
arbitrator of the claim of the Italian subject Cerruti against the Republic
of Colombia, differences arose between the parties to the arbitration in
regard to the scope and extension of the award, of which certain articles
were contested by Colombia, while Italy claimed their literal fulfillment.
The award having been made by the President of the United States, as an
act of friendly consideration and with the sole view to an impartial composition
of the matter in dispute, I could not but feel deep concern at such a miscarriage,
and while unable to accept the Colombian theory that I, in my official
capacity, possessed continuing functions as arbitrator, with power to interpret
or revise the terms of the award, my best efforts were lent to bring the
parties to a harmonious agreement as to the execution of its provisions.

A naval demonstration by Italy resulted in an engagement to pay the
liabilities claimed upon their ascertainment; but this apparent disposition
of the controversy was followed by a rupture of diplomatic intercourse
between Colombia and Italy, which still continues, although, fortunately,
without acute symptoms having supervened. Notwithstanding this, efforts
are reported to be continuing for the ascertainment of Colombia's contingent
liability on account of Cerruti's debts under the fifth article of the
award.

A claim of an American citizen against the Dominican Republic for a
public bridge over the Ozama River, which has been in diplomatic controversy
for several years, has been settled by expert arbitration and an award
in favor of the claimant amounting to about $90,000. It, however, remains
unpaid, despite urgent demands for its settlement according to the terms
of the compact.

There is now every prospect that the participation of the United States
in the Universal Exposition to be held in Paris in 1900 will be on a scale
commensurate with the advanced position held by our products and industries
in the world's chief marts.

The preliminary report of Mr. Moses P. Handy, who, under the act approved
July 19, 1897, was appointed special commissioner with a view to securing
all attainable information necessary to a full and complete understanding
by Congress in regard to the participation of this Government in the Paris
Exposition, was laid before you by my message of December 6, 1897, and
showed the large opportunities opened to make known our national progress
in arts, science, and manufactures, as well as the urgent need of immediate
and adequate provision to enable due advantage thereof to be taken. Mr.
Handy's death soon afterwards rendered it necessary for another to take
up and complete his unfinished work, and on January 11 last Mr. Thomas
W. Cridler, Third Assistant Secretary of State, was designated to fulfill
that task. His report was laid before you by my message of June 14, 1898,
with the gratifying result of awakening renewed interest in the projected
display. By a provision in the sundry civil appropriation act of July 1,
1898, a sum not to exceed $650,000 was allotted for the organization of
a commission to care for the proper preparation and installation of American
exhibits and for the display of suitable exhibits by the several Executive
Departments, particularly by the Department of Agriculture, the Fish Commission,
and the Smithsonian Institution, in representation of the Government of
the United States.

Pursuant to that enactment I appointed Mr. Ferdinand W. Peck, of Chicago,
commissioner-general, with an assistant commissioner-general and a secretary.
Mr. Peck at once proceeded to Paris, where his success in enlarging the
scope and variety of the United States exhibit has been most gratifying.
Notwithstanding the comparatively limited area of the exposition site--less
than one-half that of the World's Fair at Chicago--the space assigned to
the United States has been increased from the absolute allotment of 157,403
square feet reported by Mr. Handy to some 202,000 square feet, with corresponding
augmentation of the field for a truly characteristic representation of
the various important branches of our country's development. Mr. Peck's
report will be laid before you. In my judgment its recommendations will
call for your early consideration, especially as regards an increase of
the appropriation to at least one million dollars in all, so that not only
may the assigned space be fully taken up by the best possible exhibits
in every class, but the preparation and installation be on so perfect a
scale as to rank among the first in that unparalleled competition of artistic
and inventive production, and thus counterbalance the disadvantage with
which we start as compared with other countries whose appropriations are
on a more generous scale and whose preparations are in a state of much
greater forwardness than our

Where our artisans have the admitted capacity to excel, where our inventive
genius has initiated many of the grandest discoveries of these later days
of the century, and where the native resources of our land are as limitless
as they are valuable to supply the world's needs, it is our province, as
it should be our earnest care, to lead in the march of human progress,
and not rest content with any secondary place. Moreover, if this be due
to ourselves, it is no less due to the great French nation whose guests
we become, and which has in so many ways testified its wish and hope that
our participation shall befit the place the two peoples have won in the
field of universal development.

The commercial arrangement made with France on the 28th of May, 1898,
under the provisions of section 3 of the tariff act of 1897, went into
effect on the 1st day of June following. It has relieved a portion of our
export trade from serious embarrassment. Further negotiations are now pending
under section 4 of the same act with a view to the increase of trade between
the two countries to their mutual advantage. Negotiations with other governments,
in part interrupted by the war with Spain, are in progress under both sections
of the tariff act. I hope to be able to announce some of the results of
these negotiations during the present session of Congress.

Negotiations to the same end with Germany have been set on foot. Meanwhile
no effort has been relaxed to convince the Imperial Government of the thoroughness
of our inspection of pork products for exportation, and it is trusted that
the efficient administration of this measure by the Department of Agriculture
will be recognized as a guaranty of the healthfulness of the food staples
we send abroad to countries where their use is large and necessary.

I transmitted to the Senate on the 10th of February last information
touching the prohibition against the importation of fresh fruits from this
country, which had then recently been decreed by Germany on the ground
of danger of disseminating the San Jose scale insect. This precautionary
measure was justified by Germany on the score of the drastic steps taken
in several States of the Union against the spread of the pest, the elaborate
reports of the Department of Agriculture being put in evidence to show
the danger to German fruit-growing interests should the scale obtain a
lodgment in that country. Temporary relief was afforded in the case of
large consignments of fruit then on the way by inspection and admission
when found noninfected. Later the prohibition was extended to dried fruits
of every kind, but was relaxed so as to apply only to unpeeled fruit and
fruit waste. As was to be expected, the alarm reached to other countries,
and Switzerland has adopted a similar inhibition. Efforts are in progress
to induce the German and Swiss Governments to relax the prohibition in
favor of dried fruits shown to have been cured under circumstances rendering
the existence of animal life impossible.

Our relations with Great Britain have continued on the most friendly
footing. Assenting to our request, the protection of Americans and their
interests in Spanish jurisdiction was assumed by the diplomatic and consular
representatives of Great Britain, who fulfilled their delicate and arduous
trust with tact and zeal, eliciting high commendation. I may be allowed
to make fitting allusion to the instance of Mr. Ramsden, Her Majesty's
consul at Santiago de Cuba, whose untimely death after distinguished service
and untiring effort during the siege of that city was sincerely lamented.

In the early part of April last, pursuant to a request made at the instance
of the Secretary of State by the British ambassador at this capital, the
Canadian government granted facilities for the passage of four United States
revenue cutters from the Great Lakes to the Atlantic coast by way of the
Canadian canals and the St. Lawrence River. The vessels had reached Lake
Ontario and were there awaiting the opening of navigation when war was
declared between the United States and Spain. Her Majesty's Government
thereupon, by a communication of the latter part of April, stated that
the permission granted before the outbreak of hostilities would not be
withdrawn provided the United States Government gave assurance that the
vessels in question would proceed direct to a United States port without
engaging in any hostile operation. This Government promptly agreed to the
stipulated condition, it being understood that the vessels would not be
prohibited from resisting any hostile attack.

It will give me especial satisfaction if I shall be authorized to communicate
to you a favorable conclusion of the pending negotiations with Great Britain
in respect to the Dominion of Canada. It is the earnest wish of this Government
to remove all sources of discord and irritation in our relations with the
neighboring Dominion. The trade between the two countries is constantly
increasing, and it is important to both countries that all reasonable facilities
should be granted for its development.

The Government of Greece strongly urges the onerousness of the duty
here imposed upon the currants of that country, amounting to 100 per cent
or more of their market value. This fruit is stated to be exclusively a
Greek product, not coming into competition with any domestic product. The
question of reciprocal commercial relations with Greece, including the
restoration of currants to the free list, is under consideration.

The long-standing claim of Bernard Campbell for damages for injuries
sustained from a violent assault committed against him by military authorities
in the island of Haiti has been settled by the agreement of that Republic
to pay him $10,000 in American gold. Of this sum $5,000 has already been
paid. It is hoped that other pending claims of American citizens against
that Republic may be amicably adjusted.

Pending the consideration by the Senate of the treaty signed June 1897,
by the plenipotentiaries of the United States and of the Republic of Hawaii,
providing for the annexation of the islands, a joint resolution to accomplish
the same purpose by accepting the offered cession and incorporating the
ceded territory into the Union was adopted by the Congress and approved
July 7, 1898. I thereupon directed the United States steamship Philadelphia
to convey Rear-Admiral Miller to Honolulu, and intrusted to his hands this
important legislative act, to be delivered to the President of the Republic
of Hawaii, with whom the Admiral and the United States minister were authorized
to make appropriate arrangements for transferring the sovereignty of the
islands to the United States. This was simply but impressively accomplished
on the 12th of August last by the delivery of a certified copy of the resolution
to President Dole, who thereupon yielded up to the representative of the
Government of the United States the sovereignty and public property of
the Hawaiian Islands.

Pursuant to the terms of the joint resolution and in exercise of the
authority thereby conferred upon me, I directed that the civil, judicial,
and military powers theretofore exercised by the officers of the Government
of the Republic of Hawaii should continue to be exercised by those officers
until Congress shall provide a government for the incorporated territory,
subject to my power to remove such officers and to fill vacancies. The
President, officers, and troops of the Republic thereupon took the oath
of allegiance to the United States, thus providing for the uninterrupted
continuance of all the administrative and municipal functions of the annexed
territory until Congress shall otherwise enact.

Following the further provision of the joint resolution, I appointed
the Hons. Shelby M. Cullom, of Illinois, John T. Morgan, of Alabama, Robert
R. Hitt, of Illinois, Sanford B. Dole, of Hawaii, and Walter F. Frear,
of Hawaii, as commissioners to confer and recommend to Congress such legislation
concerning the Hawaiian Islands as they should deem necessary or proper.
The commissioners having fulfilled the mission confided to them, their
report will be laid before you at an early day. It is believed that their
recommendations will have the earnest consideration due to the magnitude
of the responsibility resting upon you to give such shape to the relationship
of those mid-Pacific lands to our home Union as will benefit both in the
highest degree, realizing the aspirations of the community that has cast
its lot with us and elected to share our political heritage, while at the
same time justifying the foresight of those who for three-quarters of a
century have looked to the assimilation of Hawaii as a natural and inevitable
consummation, in harmony with our needs and in fulfillment of our cherished
traditions.

The questions heretofore pending between Hawaii and Japan growing out
of the alleged mistreatment of Japanese treaty immigrants were, I am pleased
to say, adjusted before the act of transfer by the payment of a reasonable
indemnity to the Government of Japan.

Under the provisions of the joint resolution, the existing customs relations
of the Hawaiian Islands with the United States and with other countries
remain unchanged until legislation shall otherwise provide. The consuls
of Hawaii here and in foreign countries continue to fulfill their commercial
agencies, while the United States consulate at Honolulu is maintained for
all appropriate services pertaining to trade and the revenue. It would
be desirable that all foreign consuls in the Hawaiian Islands should receive
new exequaturs from this Government.

The attention of Congress is called to the fact that, our consular offices
having ceased to exist in Hawaii and being about to cease in other countries
coming under the sovereignty of the United States, the provisions for the
relief and transportation of destitute American seamen in these countries
under our consular regulations will in consequence terminate. It is proper,
therefore, that new legislation should be enacted upon this subject in
order to meet the changed conditions.

The interpretation of certain provisions of the extradition convention
of December 11, 1861, has been at various times the occasion of controversy
with the Government of Mexico. An acute difference arose in the case of
the Mexican demand for the delivery of Jesus Guerra, who, having led a
marauding expedition near the border with the proclaimed purpose of initiating
an insurrection against President Diaz, escaped into Texas. Extradition
was refused on the ground that the alleged offense was political in its
character, and therefore came within the treaty proviso of nonsurrender.
The Mexican contention was that the exception only related to purely political
offenses, and that as Guerra's acts were admixed with the common crime
of murder, arson, kidnaping, and robbery, the option of nondelivery became
void, a position which this Government was unable to admit in view of the
received international doctrine and practice in the matter. The Mexican
Government, in view of this, gave notice January 24, 1898, of the termination
of the convention, to take effect twelve months from that date, at the
same time inviting the conclusion of a new convention, toward which negotiations
are on foot.

In this relation I may refer to the necessity of some amendment of our
existing extradition statute. It is a common stipulation of such treaties
that neither party shall be bound to give up its own citizens, with the
added proviso in one of our treaties, that with Japan, that it may surrender
if it see fit. It is held in this country by an almost uniform course of
decisions that where a treaty negatives the obligation to surrender the
President is not invested with legal authority to act. The conferment of
such authority would be in the line of that sound morality which shrinks
from affording secure asylum to the author of a heinous crime. Again, statutory
provision might well be made for what is styled extradition by way of transit,
whereby a fugitive surrendered by one foreign government to another may
be conveyed across the territory of the United States to the jurisdiction
of the demanding state. A recommendation in this behalf made in the President's
message of 1886 was not acted upon. The matter is presented for your consideration.

The problem of the Mexican free zone has been often discussed with regard
to its inconvenience as a provocative of smuggling into the United States
along an extensive and thinly guarded land border. The effort made by the
joint resolution of March 1, 1895, to remedy the abuse charged by suspending
the privilege of free transportation in bond across the territory of the
United States to Mexico failed of good result, as is stated in Report No.
702 of the House of Representatives, submitted in the last session, March
11, 1898. As the question is one to be conveniently met by wise concurrent
legislation of the two countries looking to the protection of the revenues
by harmonious measures operating equally on either side of the boundary,
rather than by conventional arrangements, I suggest that Congress consider
the advisability of authorizing and inviting a conference of representatives
of the Treasury Departments of the United States and Mexico to consider
the subject in all its complex bearings, and make report with pertinent
recommendations to the respective Governments for the information and consideration
of their Congresses.

The Mexican Water Boundary Commission has adjusted all matters submitted
to it to the satisfaction of both Governments save in three important cases--that
of the "Chamizal" at El Paso, Tex., where the two commissioners failed
to agree, and wherein, for this case only, this Government has proposed
to Mexico the addition of a third member; the proposed elimination of what
are known as "Bancos," small isolated islands formed by the cutting off
of bends in the Rio Grande, from the operation of the treaties of 1884
and 1889, recommended by the commissioners and approved by this Government,
but still under consideration by Mexico; and the subject of the "Equitable
distribution of the waters of the Rio Grande," for which the commissioners
recommended an international dam and reservoir, approved by Mexico, but
still under consideration by this Government. Pending these questions it
is necessary to extend the life of the commission, which expires December
23 next.

The coronation of the young Queen of the Netherlands was made the occasion
of fitting congratulations.

The claim of Victor H. McCord against Peru, which for a number of years
has been pressed by this Government and has on several occasions attracted
the attention of the Congress, has been satisfactorily adjusted. A protocol
was signed May 17, 1898, whereby, the fact of liability being admitted,
the question of the amount to be awarded was submitted to the chief justice
of Canada as sole arbitrator. His award sets the indemnity due the claimant
at $40,000.

The Government of Peru has given the prescribed notification of its
intention to abrogate the treaty of friendship, commerce, and navigation
concluded with this country August 31, 1887. As that treaty contains many
important provisions necessary to the maintenance of commerce and good
relations, which could with difficulty be replaced by the negotiation of
renewed provisions within the brief twelve months intervening before the
treaty terminates, I have invited suggestions by Peru as to the particular
provisions it is desired to annul, in the hope of reaching an arrangement
whereby the remaining articles may be provisionally saved.

His Majesty the Czar having announced his purpose to raise the Imperial
Russian mission at this capital to the rank of an embassy, I responded,
under the authority conferred by the act of March 3, 1893, by commissioning
and accrediting the actual representative at St. Petersburg in the capacity
of ambassador extraordinary and plenipotentiary. The Russian ambassador
to this country has since presented his credentials.

The proposal of the Czar for a general reduction of the vast military
establishments that weigh so heavily upon many peoples in time of peace
was communicated to this Government with an earnest invitation to be represented
in the conference which it is contemplated to assemble with a view to discussing
the means of accomplishing so desirable a result. His Majesty was at once
informed of the cordial sympathy of this Government with the principle
involved in his exalted proposal and of the readiness of the United States
to take part in the conference. The active military force of the United
States, as measured by our population, territorial area, and taxable wealth,
is, and under any conceivable prospective conditions must continue to be,
in time of peace so conspicuously less than that of the armed powers to
whom the Czar's appeal is especially addressed that the question can have
for us no practical importance save as marking an auspicious step toward
the betterment of the condition of the modern peoples and the cultivation
of peace and good will among them; but in this view it behooves us as a
nation to lend countenance and aid to the beneficent project.

The claims of owners of American sealing vessels for seizure by Russian
cruisers in Bering Sea are being pressed to a settlement. The equities
of the cases justify the expectation that a measure of reparation will
eventually be accorded in harmony with precedent and in the light of the
proven facts.

The recommendation made in my special message of April 27 last is renewed,
that appropriation be made to reimburse the master and owners of the Russian
bark Hans for wrongful arrest of the master and detention of the vessel
in February, 1896, by officers of the United States district court for
the southern district of Mississippi. The papers accompanying my said message
make out a most meritorious claim and justify the urgency with which it
has been presented by the Government of Russia.

Malietoa Laupepa, King of Samoa, died on August 22 last. According to
Article I of the general act of Berlin, "his successor shall be duly elected
according to the laws and customs of Samoa."

Arrangements having been agreed upon between the signatories of the
general act for the return of Mataafa and the other exiled Samoan chiefs,
they were brought from Jaluit by a German war vessel and landed at Apia
on September 18 last.

Whether the death of Malietoa and the return of his old-time rival Mataafa
will add to the undesirable complications which the execution of the tripartite
general act has heretofore developed remains to be seen. The efforts of
this Government will, as heretofore, be addressed toward a harmonious and
exact fulfillment of the terms of the international engagement to which
the United States became a party in 1889.

The Cheek claim against Siam, after some five years of controversy,
has been adjusted by arbitration under an agreement signed July 6, 1897,
an award of 706,721 ticals (about $187,987.78 ), with release of the Cheek
estate from mortgage claims, having been rendered March 21, 1898, in favor
of the claimant by the arbitrator, Sir Nicholas John Hannen, British chief
justice for China and Japan.

An envoy from Siam has been accredited to this Government and has presented
his credentials.

Immediately upon the outbreak of the war with Spain the Swiss Government,
fulfilling the high mission it has deservedly assumed as the patron of
the International Red Cross, proposed to the United States and Spain that
they should severally recognize and carry into execution, as a modus vivendi,
during the continuance of hostilities, the additional articles proposed
by the international conference of Geneva, October 20, 1868, extending
the effects of the existing Red Cross convention of 1864 to the conduct
of naval war. Following the example set by France and Germany in 1870 in
adopting such a modus vivendi, and in view of the accession of the United
States to those additional articles in 1882, although the exchange of ratifications
thereof still remained uneffected, the Swiss proposal was promptly and
cordially accepted by us, and simultaneously by Spain.

This Government feels a keen satisfaction in having thus been enabled
to testify its adherence to the broadest principles of humanity even amidst
the clash of war, and it is to be hoped that the extension of the Red Cross
compact to hostilities by sea as well as on land may soon become an accomplished
fact through the general promulgation of the additional naval Red Cross
articles by the maritime powers now parties to the convention of 1864.

The important question of the claim of Switzerland to the perpetual
cantonal allegiance of American citizens of Swiss origin has not made hopeful
progress toward a solution, and controversies in this regard still continue.

The newly accredited envoy of the United States to the Ottoman Porte
carries instructions looking to the disposal of matters in controversy
with Turkey for a number of years. He is especially charged to press for
a just settlement of our claims for indemnity by reason of the destruction
of the property of American missionaries resident in that country during
the Armenian troubles of 1895, as well as for the recognition of older
claims of equal justness.

He is also instructed to seek an adjustment of the dispute growing out
of the refusal of Turkey to recognize the acquired citizenship of Ottoman-born
persons naturalized in the United States since 1869 without prior imperial
consent, and in the same general relation he is directed to endeavor to
bring about a solution of the question which has more or less acutely existed
since 1869 concerning the jurisdictional rights of the United States in
matters of criminal procedure and punishment under Article IV of the treaty
of 1830. This latter difficulty grows out of a verbal difference, claimed
by Turkey to be essential, between the original Turkish text and the promulgated
translation.

After more than two years from the appointment of a consul of this country
to Erzerum, he has received his exequatur.

The arbitral tribunal appointed under the treaty of February 2, 1897,
between Great Britain and Venezuela, to determine the boundary line between
the latter and the colony of British Guiana, is to convene at Paris during
the present month. It is a source of much gratification to this Government
to see the friendly resort of arbitration applied to the settlement of
this controversy, not alone because of the earnest part we have had in
bringing about the result, but also because the two members named on behalf
of Venezuela, Mr. Chief Justice Fuller and Mr. Justice Brewer, chosen from
our highest court, appropriately testify the continuing interest we feel
in the definitive adjustment of the question according to the strictest
rules of justice. The British members, Lord Herschell and Sir Richard Collins,
are jurists of no less exalted repute, while the fifth member and president
of the tribunal, M. F. De Martens, has earned a world-wide reputation as
an authority upon international law.

The claim of Felipe Scandella against Venezuela for arbitrary expulsion
and injury to his business has been adjusted by the revocation of the order
of expulsion and by the payment of the sum of $16,000.

I have the satisfaction of being able to state that the Bureau of the
American Republics, created in 1890 as the organ for promoting commercial
intercourse and fraternal relations among the countries of the Western
Hemisphere, has become a more efficient instrument of the wise purposes
of its founders, and is receiving the cordial support of the contributing
members of the international union which are actually represented in its
board of management. A commercial directory, in two volumes, containing
a mass of statistical matter descriptive of the industrial and commercial
interests of the various countries, has been printed in English, Spanish,
Portuguese, and French, and a monthly bulletin published in these four
languages and distributed in the Latin-American countries as well as in
the United States has proved to be a valuable medium for disseminating
information and furthering the varied interests of the international union.

During the past year the important work of collecting information of
practical benefit to American industries and trade through the agency of
the diplomatic and consular officers has been steadily advanced, and in
order to lay such data before the public with the least delay the practice
was begun in January, 1898, of issuing the commercial reports from day
to day as they are received by the Department of State. It is believed
that for promptitude as well as fullness of information the service thus
supplied to our merchants and manufacturers will be found to show sensible
improvement and to merit the liberal support of Congress.

The experiences of the last year bring forcibly home to us a sense of
the burdens and the waste of war. We desire, in common with most civilized
nations, to reduce to the lowest possible point the damage sustained in
time of war by peaceable trade and commerce. It is true we may suffer in
such cases less than other communities, but all nations are damaged more
or less by the state of uneasiness and apprehension into which an outbreak
of hostilities throws the entire commercial world. It should be our object,
therefore, to minimize, so far as practicable, this inevitable loss and
disturbance. This purpose can probably best be accomplished by an international
agreement to regard all private property at sea as exempt from capture
or destruction by the forces of belligerent powers. The United States Government
has for many years advocated this humane and beneficent principle, and
is now in position to recommend it to other powers without the imputation
of selfish motives. I therefore suggest for your consideration that the
Executive be authorized to correspond with the governments of the principal
maritime powers with a view of incorporating into the permanent law of
civilized nations the principle of the exemption of all private property
at sea, not contraband of war, from capture or destruction by belligerent
powers.

The Secretary of the Treasury reports that the receipts of the Government
from all sources during the fiscal year ended June 30, 1898, including
$64,751,223 received from sale of Pacific railroads, amounted to $405,321,335,
and its expenditures to $443,168,582. There was collected from customs
$149,575,062 and from internal revenue $170,900,641. Our dutiable imports
amounted to $324,635,479, a decrease of $58,156,690 over the preceding
year, and importations free of duty amounted to $291,414,175, a decrease
from the preceding year of $90,524,068. Internal-revenue receipts exceeded
those of the preceding year by $24,212,067.

The total tax collected on distilled spirits was $92,546,999; on manufactured
tobacco, $36,230,522, and on fermented liquors, $39,515,421. We exported
merchandise during the year amounting to $1,231,482,330, an increase of
$180,488,774 from the preceding year.

It is estimated upon the basis of present revenue laws that the receipts
of the Government for the year ending June 30, 1899, will be $577,874,647,
and its expenditures $689,874,647, resulting in a deficiency of $112,000,000.

On the 1st of December, 1898, there was held in the Treasury gold coin
amounting to $138,441,547, gold bullion amounting to $138,502,545, silver
bullion amounting to $93,359,250, and other forms of money amounting to
$451,963,981.

On the same date the amount of money of all kinds in circulation, or
not included in Treasury holdings, was $1,886,879,504, an increase for
the year of $165,794,966. Estimating our population at 75,194,000 at the
time mentioned, the per capita circulation was $25.09. On the same date
there was in the Treasury gold bullion amounting to $138,502,545.

The provisions made for strengthening the resources of the Treasury
in connection with the war have given increased confidence in the purpose
and power of the Government to maintain the present standard, and have
established more firmly than ever the national credit at home and abroad.
A marked evidence of this is found in the inflow of gold to the Treasury.
Its net gold holdings on November 1, 1898, were $239,885,162 as compared
with $153,573,147 on November 1, 1897, and an increase of net cash of $207,756,100,
November 1, 1897, to $300,238,275, November 1, 1898. The present ratio
of net Treasury gold to outstanding Government liabilities, including United
States notes, Treasury notes of 1890, silver certificates, currency certificates,
standard silver dollars, and fractional silver coin, November 1, 1898,
was 25.35 per cent, as compared with 16.96 per cent, November 1, 1897.

I renew so much of my recommendation of December, 1897, as follows:

That when any of the United States notes are presented for redemption
in gold and are redeemed in gold, such notes shall be kept and set apart
and only paid out in exchange for gold. This is an obvious duty. If the
holder of the United States note prefers the gold and gets it from the
Government, he should not receive back from the Government a United States
note without paying gold in exchange for it. The reason for this is made
all the more apparent when the Government issues an interest-bearing debt
to provide gold for the redemption of United States notes--a non-interest-bearing
debt. Surely it should not pay them out again except on demand and for
gold. If they are put out in any other way, they may return again, to he
followed by another bond issue to redeem them--another interest-bearing
debt to redeem a non-interest-bearing debt.
This recommendation was made in the belief that such provisions of
law would insure to a greater degree the safety of the present standard,
and better protect our currency from the dangers to which it is subjected
from a disturbance in the general business conditions of the country.
In my judgment the present condition of the Treasury amply justifies
the immediate enactment of the legislation recommended one year ago, under
which a portion of the gold holdings should be placed in a trust fund from
which greenbacks should be redeemed upon presentation, but when once redeemed
should not thereafter be paid out except for gold.

It is not to be inferred that other legislation relating to our currency
is not required; on the contrary, there is an obvious demand for it.

The importance of adequate provision which will insure to our future
a money standard related as our money standard now is to that of our commercial
rivals is generally recognized.

The companion proposition that our domestic paper currency shall be
kept safe and yet be so related to the needs of our industries and internal
commerce as to be adequate and responsive to such needs is a proposition
scarcely less important. The subject, in all its parts, is commended to
the wise consideration of the Congress.

The annexation of Hawaii and the changed relations of the United States
to Cuba, Puerto Rico, and the Philippines resulting from the war, compel
the prompt adoption of a maritime policy by the United States. There should
be established regular and frequent steamship communication, encouraged
by the United States, under the American flag, with the newly acquired
islands. Spain furnished to its colonies, at an annual cost of about $2,000,000,
steamship lines communicating with a portion of the world's markets, as
well as with trade centers of the home Government. The United States will
not undertake to do less. It is our duty to furnish the people of Hawaii
with facilities, under national control, for their export and import trade.
It will be conceded that the present situation calls for legislation which
shall be prompt, durable, and liberal.

The part which American merchant vessels and their seamen performed
in the war with Spain demonstrates that this service, furnishing both pickets
and the second line of defense, is a national necessity, and should be
encouraged in every constitutional way. Details and methods for the accomplishment
of this purpose are discussed in the report of the Secretary of the Treasury,
to which the attention of Congress is respectfully invited.

In my last annual message I recommended that Congress authorize the
appointment of a commission for the purpose of making systematic investigations
with reference to the cause and prevention of yellow fever. This matter
has acquired an increased importance as a result of the military occupation
of the island of Cuba and the commercial intercourse between this island
and the United States which we have every reason to expect. The sanitary
problems connected with our new relations with the island of Cuba and the
acquisition of Puerto Rico are no less important than those relating to
finance, commerce, and administration. It is my earnest desire that these
problems may be considered by competent experts and that everything may
be done which the most recent advances in sanitary science can offer for
the protection of the health of our soldiers in those islands and of our
citizens who are exposed to the dangers of infection from the importation
of yellow fever. I therefore renew my recommendation that the authority
of Congress may be given and a suitable appropriation made to provide for
a commission of experts to be appointed for the purpose indicated.

Under the act of Congress approved April 26, 1898, authorizing the President
in his discretion, "upon a declaration of war by Congress, or a declaration
by Congress that war exists," I directed the increase of the Regular Army
to the maximum of 62,000, authorized in said act.

There are now in the Regular Army 57,862 officers and men. In said act
it was provided--

That at the end of any war in which the United States may become involved
the Army shall be reduced to a peace basis by the transfer in the same
arm of the service or absorption by promotion or honorable discharge, under
such regulations as the Secretary of War may establish, of supernumerary
commissioned officers and the honorable discharge or transfer of supernumerary
enlisted men; and nothing contained in this act shall be construed as authorizing
the permanent increase of the commissioned or enlisted force of the Regular
Army beyond that now provided by the law in force prior to the passage
of this act, except as to the increase of twenty-five majors provided for
in section 1 hereof.
The importance of legislation for the permanent increase of the Army
is therefore manifest, and the recommendation of the Secretary of War for
that purpose has my unqualified approval. There can be no question that
at this time, and probably for some time in the future, 100,000 men will
be none too many to meet the necessities of the situation. At all events,
whether that number shall be required permanently or not, the power should
be given to the President to enlist that force if in his discretion it
should be necessary; and the further discretion should be given him to
recruit for the Army within the above limit from the inhabitants of the
islands with the government of which we are charged. It is my purpose to
muster out the entire Volunteer Army as soon as the Congress shall provide
for the increase of the regular establishment. This will be only an act
of justice and will be much appreciated by the brave men who left their
homes and employments to help the country in its emergency.
In my last annual message I stated:

The Union Pacific Railway, main line, was sold under the decree of the
United States court for the district of Nebraska on the 1st and 2d of November
of this year. The amount due the Government consisted of the principal
of the subsidy bonds, $27,236,512, and the accrued interest thereon, $31,211,711.75,
making the total indebtedness $58,448,223.75. The bid at the sale covered
the first-mortgage lien and the entire mortgage claim of the Government,
principal and interest.
This left the Kansas Pacific case unconcluded. By a decree of the court
in that case an upset price for the property was fixed at a sum which would
yield to the Government only $2,500,000 upon its lien. The sale, at the
instance of the Government, was postponed first to December 15, 1897, and
later, upon the application of the United States, was postponed to the
16th day of February, 1898.
Having satisfied myself that the interests of the Government required
that an effort should be made to obtain a larger sum, I directed the Secretary
of the Treasury, under the act passed March 3, 1887, to pay out of the
Treasury to the persons entitled to receive the same the amounts due upon
all prior mortgages upon the Eastern and Middle divisions of said railroad
out of any money in the Treasury not otherwise appropriated, whereupon
the Attorney-General prepared a petition to be presented to the court,
offering to redeem said prior liens in such manner as the court might direct,
and praying that thereupon the United States might be held to be subrogated
to all the rights of said prior lien holders and that a receiver might
be appointed to take possession of the mortgaged premises and maintain
and operate the same until the court or Congress otherwise directed. Thereupon
the reorganization committee agreed that if said petition was withdrawn
and the sale allowed to proceed on the 16th of February, 1898, they would
bid a sum at the sale which would realize to the Government the entire
principal of its debt, $6,303,000.

Believing that no better price could be obtained and appreciating the
difficulties under which the Government would labor if it should become
the purchaser of the road at the sale, in the absence of any authority
by Congress to take charge of and operate the road I directed that upon
the guaranty of a minimum bid which should give the Government the principal
of its debt the sale should proceed. By this transaction the Government
secured an advance of $3,803,000 over and above the sum which the court
had fixed as the upset price, and which the reorganization committee had
declared was the maximum which they would pay for the property.

It is a gratifying fact that the result of these proceedings against
the Union Pacific system and the Kansas Pacific line is that the Government
has received on account of its subsidy claim the sum of $64,751,223.75,
an increase of $18,997,163.76 over the sum which the reorganization committee
originally agreed to bid for the joint property, the Government receiving
its whole claim, principal and interest, on the Union Pacific, and the
principal of its debt on the Kansas Pacific Railroad.

Steps had been taken to foreclose the Government's lien upon the Central
Pacific Railroad Company, but before action was commenced Congress passed
an act, approved July 7, 1898, creating a commission consisting of the
Secretary of the Treasury, the Attorney-General, and the Secretary of the
Interior, and their successors in office, with full power to settle the
indebtedness to the Government growing out of the issue of bonds in aid
of the construction of the Central Pacific and Western Pacific bond-aided
railroads, subject to the approval of the President.

No report has yet been made to me by the commission thus created. Whatever
action is had looking to a settlement of the indebtedness in accordance
with the act referred to will be duly submitted to the Congress.

I deem it my duty to call to the attention of Congress the condition
of the present building occupied by the Department of Justice. The business
of that Department has increased very greatly since it was established
in its present quarters. The building now occupied by it is neither large
enough nor of suitable arrangement for the proper accommodation of the
business of the Department. The Supervising Architect has pronounced it
unsafe and unsuited for the use to which it is put. The Attorney-General
in his report states that the library of the Department is upon the fourth
floor, and that all the space allotted to it is so crowded with books as
to dangerously overload the structure. The first floor is occupied by the
Court of Claims. The building is of an old and dilapidated appearance,
unsuited to the dignity which should attach to this important Department.

A proper regard for the safety, comfort, and convenience of the officers
and employees would justify the expenditure of a liberal sum of money in
the erection of a new building of commodious proportions and handsome appearance
upon the very advantageous site already secured for that purpose, including
the ground occupied by the present structure and adjoining vacant lot,
comprising in all a frontage of 201 feet on Pennsylvania avenue and a depth
of 136 feet.

In this connection I may likewise refer to the inadequate accommodations
provided for the Supreme Court in the Capitol, and suggest the wisdom of
making provision for the erection of a separate building for the court
and its officers and library upon available ground near the Capitol.

The postal service of the country advances with extraordinary growth.
Within twenty years both the revenues and the expenditures of the Post-Office
Department have multiplied threefold. In the last ten years they have nearly
doubled. Our postal business grows much more rapidly than our population.
It now involves an expenditure of $100,000,000 a year, numbers 73,000 post-offices,
and enrolls 200,000 employees. This remarkable extension of a service which
is an accurate index of the public conditions presents gratifying evidence
of the advancement of education, of the increase of communication and business
activity, and of the improvement of mail facilities leading to their constantly
augmenting use.

The war with Spain laid new and exceptional labors on the Post-Office
Department. The mustering of the military and naval forces of the United
States required special mail arrangements for every camp and every campaign.
The communication between home and camp was naturally eager and expectant.
In some of the larger places of rendezvous as many as 50,000 letters a
day required handling. This necessity was met by the prompt detail and
dispatch of experienced men from the established force and by directing
all the instrumentalities of the railway mail and post-office service,
so far as necessary, to this new need. Congress passed an act empowering
the postmaster-General to establish offices or branches at every military
camp or station, and under this authority the postal machinery was speedily
put into effective operation.

Under the same authority, when our forces moved upon Cuba, Puerto Rico,
and the Philippines they were attended and followed by the postal service.
Though the act of Congress authorized the appointment of postmasters where
necessary, it was early determined that the public interests would best
be subserved, not by new designations, but by the detail of experienced
men familiar with every branch of the service, and this policy was steadily
followed. When the territory which was the theater of conflict came into
our possession, it became necessary to reestablish mail facilities for
the resident population as well as to provide them for our forces of occupation,
and the former requirement was met through the extension and application
of the latter obligation. I gave the requisite authority, and the same
general principle was applied to this as to other branches of civil administration
under military occupation. The details are more particularly given in the
report of the postmaster-General, and, while the work is only just begun,
it is pleasing to be able to say that the service in the territory which
has come under our control is already materially improved.

The following recommendations of the Secretary of the Navy relative
to the increase of the Navy have my earnest approval:

1. Three seagoing sheathed and coppered battle ships of about 13,500
tons trial displacement, carrying the heaviest armor and most powerful
ordnance for vessels of their class, and to have the highest practicable
speed and great radius of action. Estimated cost, exclusive of armor and
armament, $3,600,000 each.

2. Three sheathed and coppered armored cruisers of about 12,000 tons
trial displacement, carrying the heaviest armor and most powerful ordnance
for vessels of their class, and to have the highest practicable speed and
great radius of action. Estimated cost, exclusive of armor and armament,
$4,000,000 each.

3. Three sheathed and coppered protected cruisers of about 6,000 tons
trial displacement, to have the highest practicable speed and great radius
of action, and to carry the most powerful ordnance suitable for vessels
of their class. Estimated cost, exclusive of armor and armament, $2,150,000
each.

4. Six sheathed and coppered cruisers of about 2,500 tons trial dis.
placement, to have the highest speed compatible with good cruising qualities,
great radius of action, and to carry the most powerful ordnance suited
to vessels of their class. Estimated cost, exclusive of armament, $1,141,800
each.

I join with the Secretary of the Navy in recommending that grades of
admiral and vice-admiral be temporarily revived, to be filled by officers
who have specially distinguished themselves in the war with Spain.

I earnestly urge upon Congress the importance of early legislation providing
for the taking of the Twelfth Census. This is necessary in view of the
large amount of work which must be performed in the preparation of the
schedules preparatory to the enumeration of the population.

There were on the pension rolls on June 30, 1898, 993,714 names, an
increase of nearly 18,000 over the number on the rolls on the same day
of the preceding year. The amount appropriated by the act of December 22,
1896, for the payment of pensions for the fiscal year of 1898 was $140,000,000.
Eight million seventy thousand eight hundred and seventy-two dollars and
forty-six cents was appropriated by the act of March 31, 1898, to cover
deficiencies in army pensions, and repayments in the sum of $12,020.33,
making a total of $148,082,892.79 available for the payment of pensions
during the fiscal year 1898. The amount disbursed from that sum was $144,651,879.80,
leaving a balance of $3,431,012.99 unexpended on the 30th of June, 1898,
which was covered into the Treasury. There were 389 names added to the
rolls during the year by special acts passed at the second session of the
Fifty-fifth Congress, making a total of 6,486 pensioners by Congressional
enactments since 1861.

The total receipts of the Patent Office during the past year were $1,253,948.44.
The expenditures were $1,081,633.79, leaving a surplus of $172,314.65.

The public lands disposed of by the Government during the year reached
8,453,896.92 acres, an increase of 614,780.26 acres over the previous year.
The total receipts from public lands during the fiscal year amounted to
$2,277,995.18, an increase of $190,063.90 over the preceding year. The
lands embraced in the eleven forest reservations which were suspended by
the act of June 4, 1897, again became subject to the operations of the
proclamations of February 22, 1897, creating them, which added an estimated
amount of 19,951,360 acres to the area embraced in the reserves previously
created. In addition thereto two new reserves were created during the year--the
Pine Mountain and Zaca Lake Reserve, in California, embracing 1,644,594
acres, and the Prescott Reserve, in Arizona, embracing 10,240 acres--while
the Pecos River Reserve, in New Mexico, has been changed and enlarged to
include 120,000 additional acres.

At the close of the year thirty forest reservations, not including those
of the Afognak Forest and the Fish-Culture Reserve, in Alaska, had been
created by Executive proclamations under section 24 of the act of March
3, 1891, embracing an estimated area of 40,719,474 acres.

The Department of the Interior has inaugurated a forest system, made
possible by the act of July, 1898, for a graded force of officers in control
of the reserves. This system has only been in full operation since August,
but good results have already been secured in many sections. The reports
received indicate that the system of patrol has not only prevented destructive
fires from gaining headway, but has diminished the number of fires.

The special attention of the Congress is called to that part of the
report of the Secretary of the Interior in relation to the Five Civilized
Tribes. It is noteworthy that the general condition of the Indians shows
marked progress. But one outbreak of a serious character occurred during
the year, and that among the Chippewa Indians of Minnesota, which happily
has been suppressed.

While it has not yet been practicable to enforce all the provisions
of the act of June 28, 1898, "for the protection of the people of the Indian
Territory, and for other purposes," it is having a salutary effect upon
the nations composing the five tribes. The Dawes Commission reports that
the most gratifying results and greater advance toward the attainment of
the objects of the Government have been secured in the past year than in
any previous year. I can not too strongly indorse the recommendation of
the commission and of the Secretary of the Interior for the necessity of
providing for the education of the 30,000 white children resident in the
Indian Territory.

The Department of Agriculture has been active in the past year. Explorers
have been sent to many of the countries of the Eastern and Western hemispheres
for seeds and plants that may be useful to the United States, and with
the further view of opening up markets for our surplus products. The Forestry
Division of the Department is giving special attention to the treeless
regions of our country and is introducing species specially adapted to
semiarid regions. Forest fires, which seriously interfere with production,
especially in irrigated regions, are being studied, that losses from this
cause may be avoided. The Department is inquiring into the use and abuse
of water in many States of the West, and collating information regarding
the laws of the States, the decisions of the courts, and the customs of
the people in this regard, so that uniformity may be secured. Experiment
stations are becoming more effective every year. The annual appropriation
of $720,000 by Congress is supplemented by $400,000 from the States. Nation-wide
experiments have been conducted to ascertain the suitableness as to soil
and climate and States for growing sugar beets. The number of sugar factories
has been doubled in the past two years, and the ability of the United States
to produce its own sugar from this source has been clearly demonstrated.

The Weather Bureau forecast and observation stations have been extended
around the Caribbean Sea, to give early warning of the approach of hurricanes
from the south seas to our fleets and merchant marine.

In the year 1900 will occur the centennial anniversary of the founding
of the city of Washington for the permanent capital of the Government of
the United States by authority of an act of Congress approved July 16,
1790. In May, 1800, the archives and general offices of the Federal Government
were removed to this place. On the 17th of November, 1800, the National
Congress met here for the first time and assumed exclusive control of the
Federal district and city. This interesting event assumes all the more
significance when we recall the circumstances attending the choosing of
the site, the naming of the capital in honor of the Father of his Country,
and the interest taken by him in the adoption of plans for its future development
on a magnificent scale.

These original plans have been wrought out with a constant progress
and a signal success even beyond anything their framers could have foreseen.
The people of the country are justly proud of the distinctive beauty and
government of the capital and of the rare instruments of science and education
which here find their natural home.

A movement lately inaugurated by the citizens to have the anniversary
celebrated with fitting ceremonies, including, perhaps, the establishment
of a handsome permanent memorial to mark so historical an occasion and
to give it more than local recognition, has met with general favor on the
part of the public.

I recommend to the Congress the granting of an appropriation for this
purpose and the appointment of a committee from its respective bodies.
It might also be advisable to authorize the President to appoint a committee
from the country at large, which, acting with the Congressional and District
of Columbia committees, can complete the plans for an appropriate national
celebration.

The alien contract law is shown by experience to need some amendment;
a measure providing better protection for seamen is proposed; the rightful
application of the eight-hour law for the benefit of labor and of the principle
of arbitration are suggested for consideration; and I commend these subjects
to the careful attention of the Congress.

The several departmental reports will be laid before you. They give
in great detail the conduct of the affairs of the Government during the
past year and discuss many questions upon which the Congress may feel called
upon to act.